REG - Royal Bk Scot.Grp. - Half Year Report - Part 1 <Origin Href="QuoteRef">RBS.L</Origin> - Part 10

NatwestAnnouncement

05/08/2016 07:08

- Part 10: For the preceding part double click  ID:nRSE3368Gi 

which provides Swiss banks with an
opportunity to obtain resolution, through non-prosecution agreements or non-target letters, of the DOJ's investigations of
the role that Swiss banks played in concealing the assets of US tax payers in offshore accounts (US related accounts). In
December 2013, Coutts & Co Ltd., a member of the Group incorporated in Switzerland, notified the DOJ that it intended to
participate in the Programme. 
 
As required by the Programme, Coutts & Co Ltd. subsequently conducted a review of its US related accounts and presented the
results of the review to the DOJ. On 23 December 2015, Coutts & Co Ltd. entered into a non-prosecution agreement (the NPA)
in which Coutts & Co Ltd. paid a US$78.5 million penalty and acknowledged responsibility for certain conduct set forth in a
statement of facts accompanying the agreement.  Under the NPA, which has a term of four years, Coutts & Co Ltd. is
required, among other things, to provide certain information, cooperate with DOJ's investigations, and commit no U.S.
federal offences.  If Coutts & Co Ltd. abides by the NPA, the DOJ will not prosecute it for certain tax-related and
monetary transaction offenses in connection with US related accounts. 
 
Notes 
 
15. Litigation, investigations and reviews (continued) 
 
Opening of enforcement proceedings by FINMA against Coutts & Co Ltd 
 
The Swiss Financial Market Supervisory Authority (FINMA) has opened enforcement proceedings against Coutts & Co Ltd, a
member of RBS incorporated in Switzerland, with regard to certain client accounts held with Coutts & Co Ltd. Coutts & Co
Ltd is also cooperating with authorities in other jurisdictions in relation to connected accounts. 
 
Review of suitability of advice provided by Coutts & Co 
 
In 2013 the FCA conducted a thematic review of the advice processes across the UK wealth management industry. As a result
of this review, Coutts & Co undertook a past business review into the suitability of investment advice provided to its
clients. This review is well advanced, with the focus on Coutts & Co contacting remaining clients and offering redress in
appropriate cases. RBS has made appropriate provision based on its estimate of exposure arising from this review. 
 
Regulator requests concerning Mossack Fonseca 
 
In common with other banks, RBS received a letter from the FCA in April 2016 requesting information about any relationship
RBS has with the Panama-based law firm Mossack Fonseca or any individuals named in recent media coverage in connection with
the same. RBS responded to the FCA setting out details of the limited services provided to Mossack Fonseca and its clients
and is continuing to correspond with the FCA and other regulators on this matter. RBS is also progressing with its internal
review, as well as monitoring all new information published. 
 
Enterprise Finance Guarantee Scheme 
 
The Enterprise Finance Guarantee (EFG) scheme is a government lending initiative for small businesses with viable business
proposals that lack security for conventional lending. From 2009 until the end of 2015, RBS provided over £980 million of
lending under the EFG scheme. RBS identified a number of instances where it had not properly explained to customers how
borrower and guarantor liabilities work under the EFG scheme. There were also concerns around the eligibility of some
customers to participate in the EFG scheme and around potential over or under-payment of quarterly premiums paid by
customers. In January 2015, RBS announced a review of all EFG loans where there was a possibility that the customer may
have been disadvantaged. The review has been completed and RBS has sent review outcomes to all affected customers, which in
some cases involves payment of redress. RBS has made appropriate provision based on its estimate of exposure arising from
this review. 
 
Review and investigation of treatment of tracker mortgage customers in Ulster Bank Ireland Limited (now Ulster Bank Ireland
DAC) 
 
On 22 December 2015, the Central Bank of Ireland (CBI) announced that it had written to a number of lenders requiring them
to put in place a robust plan and framework to review the treatment of customers who have been sold mortgages with a
tracker interest rate or with a tracker interest rate entitlement. The CBI stated that the intended purpose of the review
was to identify any cases where customers' contractual rights under the terms of their mortgage agreements were not fully
honoured, or where lenders did not fully comply with various regulatory requirements and standards regarding disclosure and
transparency for customers. The CBI has required Ulster Bank Ireland DAC (UBI DAC), a member of RBS, incorporated in the
Republic of Ireland, to participate in this review and UBI DAC is co-operating with the CBI in this regard. RBS has made
appropriate provision based on its current estimate of exposure arising from this matter. 
 
Separately, on 15 April 2016, the CBI notified UBI DAC that it was also commencing an investigation under its
Administrative Sanctions Procedure into suspected breaches of the Consumer Protection Code 2006 during the period 4 August
2006 to 30 June 2008 in relation to certain customers who switched from tracker mortgages to fixed rate mortgages. 
 
Notes 
 
16. Related party transactions 
 
UK Government 
 
The UK Government and bodies controlled or jointly controlled by the UK Government and bodies over which it has significant
influence are related parties of the Group. The Group enters into transactions with many of these bodies on an arm's length
basis. 
 
In March 2016, RBS completed the normalisation of its capital structure: the final dividend of £1.2 billion was paid in
respect of the Dividend Access Share (DAS) owned by the UK Government and the DAS re-designated a single B ordinary share
which was then cancelled. 
 
Bank of England facilities 
 
In the ordinary course of business, the Group may from time to time access market-wide facilities provided by the Bank of
England. 
 
The Group's other transactions with the UK Government include the payment of taxes, principally UK corporation tax and
value added tax; national insurance contributions; local authority rates; and regulatory fees and levies (including the
bank levy and FSCS levies). 
 
Other related parties 
 
(a) In their roles as providers of finance, Group companies provide development and other types of capital support to
businesses. These investments are made in the normal course of business and on arm's length terms. In some instances, the
investment may extend to ownership or control over 20% or more of the voting rights of the investee company. However, these
investments are not considered to give rise to transactions of a materiality requiring disclosure under IAS 24. 
 
(b) The Group recharges The Royal Bank of Scotland Group Pension Fund with the cost of administration services incurred by
it. The amounts involved are not material to the Group. 
 
Full details of the Group's related party transactions for the year ended 31 December 2015 are included in the 2015 Annual
Report and Accounts. 
 
Notes 
 
17. Rating agencies 
 
Following the UK referendum vote to leave the European Union, in June 2016, Standard & Poor's revised the outlook on the
majority of UK banks, including The Royal Bank of Scotland Group plc and its subsidiaries, to reflect rising economic risks
for the UK domestic banking industry. As a result, the Outlook from Standard & Poor's moved from Positive to Stable
(current ratings were unchanged). Moody's changed the Outlook on several UK banks. However it kept The Royal Bank of
Scotland Group plc and its subsidiaries' Outlook as Positive. 
 
The current ratings for The Royal Bank of Scotland Group plc and its subsidiaries are set out in the table below: 
 
                                               Moody's              Fitch         Standard & Poor's  
                                               Long-term  Outlook   Short-term    Long-term          Outlook  Short-term    Long-term  Outlook  Short-term  
 The Royal Bank of    Scotland Group plc (1)   Ba1        Positive  NP            BBB+               Stable   F2            BBB-       Stable   A-3         
                                                                                                                                                            
 The Royal Bank of   Scotland plc              A3         Positive  P-2           BBB+               Stable   F2            BBB+       Stable   A-2         
                                                                                                                                                            
 National Westminster   Bank Plc               A3         Positive  P-2           BBB+               Stable   F2            BBB+       Stable   A-2         
                                                                                                                                                            
 The Royal Bank of Scotland  N.V.              A3         Positive  P-2           BBB+               Stable   F2            BBB+       Stable   A-2         
                                                                                                                                                            
 RBS Securities Inc.                           -          Positive  -             BBB+               Stable   F2            BBB+       Stable   A-2         
                                                                                                                                                            
 The Royal Bank of Scotland International Ltd  -          -         -             BBB+               Stable   F2            -          -        -           
                                                                                                                                                            
 Ulster Bank Ltd                               A3         Positive  P-2           BBB+               Stable   F2            BBB        Stable   A-2         
                                                                                                                            -                               
 Ulster Bank Ireland DAC (2)                   Baa3/Ba1   Stable    P-3/NP        BBB                Stable   F2            BBB        Stable   A-2         
 
 
Notes: 
 
 (1)  Moody's ratings for The Royal Bank of Scotland Group plc are considered to be below investment grade.                                                                                                                    
 (2)  The table shows Moody's short-term and long-term senior unsecured debt ratings (Ba1 and NP, below investment grade) and Moody's short-term and long-term deposit ratings (Baa3 and P-3 respectively, investment grade).  
 
 
Notes 
 
18. Post balance sheet events 
 
VocaLink Holdings Limited 
 
On 21 July 2016, RBS announced that it expects to report a gain of approximately £150 million on completion of the proposed
sale of Vocalink Holdings Limited, in which RBS has a 21.4% interest, to Mastercard Incorporated. 
 
EBA EU-wide stress test 
 
On 1 August 2016 the European Banking Authority (EBA) and the Prudential Regulation Authority (PRA) announced the results
of the 2016 EBA EU-wide stress test. The 2016 EBA EU-wide stress test does not contain a pass/fail threshold. 
 
On a fully loaded Basel 3 basis, RBS's modelled Common Equity Tier 1 (CET1) ratio under the adverse scenario was 8.1% as at
31 December 2018. The low point CET1 ratio under this scenario was 7.8% as at 31 December 2017. RBS's modelled leverage
ratio under the adverse scenario was 3.6% on a fully loaded Basel 3 basis and 4.2% under the PRA transitional definition
for leverage ratio as at 31 December 2018. The low point leverage ratio under this scenario was 3.5% on a fully loaded
Basel 3 basis as at 31 December 2016 and 4.2% under the PRA transitional definition as at 31 December 2017. 
 
Payment Protection Insurance (PPI) 
 
On 2 August 2016, the FCA issued Consultation Paper 16/20, in which it outlines feedback received on its proposals in
CP15/39 and sets out proposals for revised rules and guidance for how firms should handle PPI complaints fairly in light of
the Plevin decision.  The deadline for responding to the FCA Consultation Paper 16/20 is 11 October 2016.  In light of this
development, RBS has increased its provision for PPI by £400 million. 
 
19. Date of approval 
 
This announcement was approved by the Board of directors on 4 August 2016. 
 
This information is provided by RNS
The company news service from the London Stock Exchange